Charities with few trustees are most likely to fail, says OSCR | Friday 30th July 2010

Charities with few trustees are most likely to fail, says OSCR

By Paul Jump, Third Sector, 04 May 2010

Charities with low numbers of trustees are the most likely to fail, according to the Office of the Scottish Charity Regulator.

The finding was contained in a report on charity resilience published yesterday by the OSCR.

Based on scrutiny of submissions received by the OSCR in 2009, the report found that trustee recruitment and retention was a key indicator of whether charities were likely to survive, especially if they were small.

It found that charities wound up in 2009 had an average of four trustees, compared with an average for all charities of 13. Charities that expanded in 2009 had an average of nine trustees.

The report notes that 80 per cent of failed organisations had annual incomes of less than £25,000, and 54 per cent less than £2,000.

"Given their size, a reduction in the number of those involved in a governance role is likely to have affected their capacity to manage the organisation," it says.

The report was commissioned as part of the OSCR's response to the economic downturn. The regulator has also published a policy statement on its approach to charities in financial difficulties.

It says the regulator will monitor the accounts of charities with annual incomes of more than £25,000 and intervene when it identifies a risk, such as a sudden contraction of income or low reserves.

"We will follow up any concerns to ensure that trustees are aware and are taking appropriate action in the interests of the charity," the report says. "This includes encouraging the charity to seek professional advice."

As a last resort, the OSCR says it could use its statutory powers to compel action by a charity.